The ongoing selling in the domestic equity markets has given a huge dent in investors’ portfolio. However, as many as 67 stocks on Dalal Street managed to defy gravity to rally over 100% since October 2024. Overall, market sentiment remained subdued due to heavy selling by foreign institutional investors (FIIs), weak quarterly earnings at home, US tariffs, resultant rise in dollar (and record low rupee) and US bond yields are all making domestic equities unattractive.
The benchmark BSE Sensex plunged 9% to around 76,294 on February 11, 2025, from 84,300 on September 30, 2024. On the other hand, select small-cap companies such as RRP Semiconductor, Elitecon International and Arunis Abode rallied 531%, 476% and 443%, respectively, during the same period.
Broader indices such as the BSE Smallcap and BSE Midcap index retreated 17% each since October 2024. Some other stocks such as Vega Jewellers, Golden Crest Education & Services, Kothari Industrial Corporation, Kati Patang Lifestyle, Onix Solar Energy, Yuvraaj Hygiene Product, Sunrise Efficient Marketing, IMEC Services and Kore Foods also advanced somewhere between 300%-430% during October 1, 2024, and February 11, 2025.
Sharing his view on mid-cap, small-caps and SME counters, Avinash Gorakshakar, Head of Research at Profitmart Securities told BTTV that valuations of these pockets were gone up very fast in a short period of time. “It is better to wait and watch before investing in these counters. Mutual funds may start accumulating stocks across sectors again. In terms of earnings, January-March quarter may be equally challenging.”
BNP Paribas Exane said, “The strong performance of mid and small caps since January 2023 has increased their valuation premiums over Nifty 50. Both mid and small caps are currently trading at rich valuations compared with their respective long-term averages.
“We see better value in large-caps and prefer these over mid-and small-caps in CY25,” the global brokerage said in a report.
Data further highlighted players such as Colab Platforms, Naturite Agro Products, Aayush Art And Bullion, Anand Rayons, AK Spintex, Rajasthan Tube Manufacturing Company, Svam Softwares, Trident Texofab, Polo Queen Industrial & Fintech, Sodhani Academy of Fintech Enablers, Shukra Pharmaceuticals, Narmada Macplast Drip Irrigation Systems and Aarvee Denims & Exports also gained more than 200% during the same period.
What to expect from the market? According to BNP Paribas Exane, the gap between 10-year G-Sec bond yields and the next twelve months (NTM) Nifty 50 earnings yields has narrowed, though probability of a significant upside in equities remains low. It further added that a renewed interest in China is a potential risk for Indian equities. “We saw this playing out briefly towards end-2022 and in Oct-24 on China stimulus expectations,” the global financial services firm said.
With a gain of more than 150%, Shalimar Agencies, Padam Cotton Yarns, Sobhagya Mercantile, Kiran Print-Pack, Jattashankar Industries, VTM, Indo Thai Securities, Tera Software, Relic Technologies, Bridge Securities and Mizzen Ventures stood among other major gainers on the list.